America's Fastest-Growing Cities

There was a time in the early 1990s when Austin, Texas, was the quintessential see-through city, with empty office towers downtown and vacant subdivisions meandering through the surrounding limestone hills.

No longer. Austin realtor Kevin Elliott says buyers are snapping up houses as companies like Apple, Progressive Insurance and Whole Foods add hundreds of jobs and out-of-staters gladly pay up for what, to them, appear to be ridiculously cheap homes.

"My last three listings I’ve had multiple offers, and they sold for either full price or more than full price," said Elliott, with the Home Resource Group of Keller Williams Realty. "They were all under contract within 48 hours."

A revived home market is just one side of the boom in Austin, which ranks first on Forbes' list of America's Fastest-Growing Cities for the second year in a row. The Austin metropolitan area -- including the northern suburb of Round Rock, home to Dell Computer -- is expected to have an economic growth rate of 6% a year through 2016, according to Moody's Analytics, more than double the nation as a whole. Apple is likely to sign off soon on plans to build a $304 million operations center that will employ as many as 3,600 people.

As usual, Texas dominates our list of the fastest-growing cities, with Dallas-Fort Worth, Houston and San Antonio all in the top 10. Seven of the top 10 cities are in the South, supporting the idea that low taxes and inexpensive real estate are still drawing jobs and economic activity from other parts of the country.

To construct the list, we ranked the 100 largest metropolitan statistical areas according to projections of economic and population growth from Moody's. We then factored in median income, unemployment rates and employment growth, to discriminate between cities like Austin, which are getting larger, and rebounding economies like Las Vegas. This filtering also knocked out fast-growing cities like McAllen, Texas, where a No. 4 rank on economic growth was countered by a bottom-quartile performance on median household income.

Dallas-Fort Worth came in second, with a projected economic growth rate of 4.9% through 2016 and a population increase of 2.2%. San Jose, Calif., ranks third, thanks to robust projected economic growth of 4.7% and a Silicon Valley-fueled median household income of close to $84,000, the nation's fourth-highest. On raw population growth, San Jose doesn't measure up: Moody's projects a mere 0.9% annual population increase through 2016, as sky-high property values and limited land for expansion hinder the city's to grow in a physical sense.

Houston places fourth, as the city's proximity to booming Latin America economies and cheap real estate promise to continue a decades-long expansion that has seen the Houston MSA's population climb 65% since 1990 to a current 6.3 million. Moody's projects Houston will add another 484,000 residents -- the equivalent of Kansas City, Mo. -- by 2016. Houston's economy, powered by energy and health care, is expected to grow at 4.6% a year over the period.

In sixth place is perennial fastest-cities contender Raleigh, N.C. Raleigh tops the list in terms of raw population growth with a projected rate of 3.8% through 2016, almost four times the national average. The city's economic growth rate is projected to be a less robust 2.4%. But Raleigh has continued to draw businesses to relocate into the region as well as retain high-paying employers like software merchant Red Hat, which agreed to stay in town and will add 540 jobs; Xerox's Affiliated Computer Services unit, which announced plans to add 1,650 jobs; and Biogen Idec, which is hiring another 300.

"We tend to see a lot of relocations, particularly from the Northeast," said James Sauls, Raleigh's director of economic development. "Whether it's cost of living, cost of doing business, overall quality of life, we seem to have an advantage."

The Raleigh MSA in 1990 had a population of 332,000, making it a third the size of Rochester, N.Y. By 2016 the city is projected to have a population of 1.4 million, making it larger than Rochester by the equivalent of one Omaha, Neb.

Austin's advantages foretell a future of steady growth. State capitals nationwide tend to perform better economically then most other cities, and Austin is also home to the prestigious University of Texas. The state also doesn't have an income tax (although property taxes on homes in affluent areas like Austin make up for it since the state compels them to shift some of that revenue to poorer parts of the state). There's also plenty of land surrounding the city for expansion, and it doesn't hurt that Austin went through a real estate binge in the 1980s that left it with massive amounts of office and industrial space that the U.S. taxpayers helped pay for for through the savings-and-loan bailout.

Austin is expected to grow its population at 2.8% a year through 2016, almost triple the national rate. Since 1990, Austin has added 1 million residents, more than the entire population of the city of Detroit. The city pulled in 35 corporate relocations last year, adding 6,000 jobs, and the city and state governments this year approved some $30 million in incentives to induce Apple to build a new campus for its Americas Operations unit.

Austin beat out Phoenix for the new operations center, and Apple’s filing with the city details what a coup that was: The company estimates its jobs will average $54,000 a year, ranging from $40,000 entry-level positions to 270 managers and executives making $114,000 to $211,000 a year.

Austin's commercial real estate market, long suffering from an overhang of space, is recovering. Brokers Jones Lang LaSalle report 438,000 square feet of office space was absorbed in the central business district in January. The vacancy rate in the once-empty office towers is still at 17%, but rents increased 3.1% year over year and some downtown tenants are signing leases at 32% above last year.

Brokers have long bemoaned the lack of international flights out of Austin's airport, which they believe limits the city's attractiveness for corporate relocations. That may change. A Formula One racetrack 15 miles outside of town, boosters say, will finally provide enough traffic for the airlines to add Austin to their routes.

I am a senior editor at Forbes, covering legal affairs, corporate finance, macroeconomics and the occasional sailing story. I was the Southwest Bureau manager for Forbes in Houston from 1999 to 2003, when I returned home to Connecticut for a Knight fellowship at Yale Law Sc...